THE BLOG
09/17/2014 02:10 pm ET Updated Nov 17, 2014

Hospital Executives Beware: Impatient Patients Are Taking Charge

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In recent years, there's been a seismic shift in the business model of the U.S. health care industry -- hospital executives must adapt or face the danger of becoming obsolete.

Recent developments have forced the hand of an industry famous for its "wizard behind the curtain" mystery. Coupled with the Internet, health care reform has unlocked the world of hospitals to consumer review. Now, patients have multiple options. They are informed, cost-conscious, and they're shopping for health care the way they shop for a new computer: by seeking the best value for their money.

Four Current Challenges Facing Health Care Executives

1. No more wizard behind the curtain. Hospitals and doctors are now publicly rated and measured by their quality outcomes and patient satisfaction. Resources such as the Centers for Medicare & Medicaid Services (CMS), Joint Commission, Healthgrades.com, HealthCare.org and dozens of other websites help consumers search, compare, and assess doctors and hospitals. If they don't see acceptable levels of care and results, they will choose an individual or organization with better metrics.

2. No more blank checks. Many patients now have high deductible insurance plans and large copays. The rate of enrollment in high-deductible plans has more than doubled since 2009. As they become responsible for ever larger out-of-pocket expenses, patients are shopping around for cost-effective options. For example, the Colorado-based Center for Improving Value in Healthcare recently launched a new version of its All Payer Claims Database, which allows patients to compare the cost of common procedures.

3. No more hospital supremacy. Options like urgent care centers and freestanding emergency departments are more available, and attractive, than ever before. There are now more than 10,000 urgent care centers in the U.S.; they're typically cheaper and have shorter wait times than traditional hospital emergency rooms. In addition, many procedures that once required days in the hospital are now performed as outpatient procedures at ambulatory care facilities.

4. No results, no reimbursement. Accountable Care Organizations are moving patients away from the traditional fee-for-service model and replacing it with one that emphasizes quality, value and results. In this pay-for-performance world, insurers reward hospitals for better care, incentivizing physicians to focus on prevention rather than solely on treatment of existing conditions. Insurance companies look at readmission numbers and the long-term success rates of patients after they leave the hospital. If those numbers are not acceptable, payments are lowered or simply refused outright.

The Experts Speak: Three Imperatives for Hospital Executives

The challenge for hospital executives is to modify their organizations to respond to these changes while continuing to provide safe and efficient care. This is a complicated balancing act that has many scratching their heads.

In my work as an executive coach for health care CEOs and other administrators, I travel the country talking to industry leaders. I educate them about current trends, help them identify challenges, and present strategies for them to thrive in the 21st century. I recently spoke with three prominent hospital executives to get their unique perspectives on navigating the post-Affordable Care Act world.

Partner with Patients

"Health care is now a consumer-oriented business; we have to get in front of that as executives," notes Lynne Wagner, Chief Nursing Officer at Denver's Rose Medical Center (recognized as one of the nation's top 100 hospitals). Wagner notes that patients have started to do their homework, and it's giving them a new level of control.

"Patients," Wagner says, "are no longer content with what they had to put up with in the past. Instead of a one-sided relationship, we are now partnering with our patients. It's actually a great time for us to renew our commitment to quality, safety and patient satisfaction." First and foremost, this is a mindset. As Wagner demonstrates, instead of seeing the Affordable Care Act as an obstacle, smart executives will view it as a rallying cry.

Engage Physicians

Patients aren't the only parties hospital executive teams must engage. Dr. Herman Williams, Senior Vice President and Chief Medical Officer for RegionalCare Hospital Partners, a growing system of community hospitals recognized for their commitment to high quality care, observes that "hospitals and physicians must be partners; if we're not communicating effectively, none of us are going to be successful."

Executives must leverage physicians to become true value-added partners, rather than viewing them as experts who provide services. Despite the oft-observed friction between administrators and physicians, executives must remember and reinforce that "we're all focused on providing the maximal level of care for all of our patients, as well as managing the bottom-line." Most actionably, hospital administrators must ensure their physician community is represented in their C-suite, and that the physician filling the role is well-regarded and able to effect change.

Inspire Employees

As patients take charge, accountability is required from the CEO to the nurses at the bedside. This begins by getting the right people on the bus. Jacob Wiesmann, CFO of a New Hampshire hospital that's been named a top performer in quality by the Joint Commission, believes that "we have to get the best talent -- from the doctors to the nurses to the aides -- everyone who enters the patient's room."

Second, administrators must move from a "because I told you so" management style to a more collaborative one. Wiesmann suggests, "health care leaders must spend time with employees at the bedside, provide real-time coaching, and partner with them to optimize the patient experience." Leading-edge hospitals -- among them many of my clients -- are implementing robust leadership development programs to ensure their leaders are up to this challenge.

The Big Picture

At the most basic level, the biggest transformation opportunity within hospitals are the executives themselves. In the past, hospital administrators have been rewarded for the number of bodies in beds. Now, notes Wiesmann, "hospitals are no longer hospitals; we are health care companies that are directly accountable to customers." To be successful, they must provide excellent care while being transparent, keeping costs down and trimming inefficiencies.

To put it bluntly, without a change in course, hospital executives are danger of going the way of the railroads -- this industry held an unquestioned monopoly... until it didn't. If executives don't adapt to the new realities of health care, they too could wake up one day to find that they've become obsolete.